The top brass of the Bank of England have rejected suggestions that new regulations to hold bank executives to account for wrongdoing on their watch had been “watered down” in response to lobbying from the financial sector.
Last week the Treasury scrapped the “reverse burden of proof” in the new Senior Managers’ Regime covering bank executives – meaning that they would have had to prove they were unaware of malfeasance – with a less onerous “duty of responsibility”.
Appearing before the Commons Treasury Select Committee, Andrew Bailey, a deputy governor of the Bank of England and head of the Prudential Regulation Authority, said there had been a lot of unhelpful “noise” around the rule and that he supported the Treasury’s decision to drop it.
“This is not a watering down” Mr Bailey told MPs, adding that it would still represent a strengthening of the existing conduct rules.
That view was backed by the Bank’s Governor, Mark Carney. “I view this as a change in process as opposed to a change in substance” he told the committee. “The responsibility lies with the senior managers and those responsibilities are going to be clearly articulated – and we will hold them to this. That brings the individuals accountability not only for their own actions but for the institution.”
Banks will be subject to the new conduct rules from next March – and they will be extended to other finance-sector workers from 2018.
Mr Bailey also rejected claims that new rules on ring-fencing retail banks had been diluted. The Bank is proposing to allow retail bank to transfer profits through the ring-fence. This has been widely interpreted as a relaxation, although it was allowed for in the 2011 Vickers report.
